Stakeholders propose Six ways of boosting agriculture, SMEs funding

Dar es Salaam. Agricultural stakeholders yesterday underscored six ways to attract agricultural financing with which to take the sector to higher levels.

People who spoke during a private sector roundtable meeting on agriculture and SMEs financing for inclusive and green growth yesterday recommended improvement in the business environment to encourage financial institutions to provide loans and that efforts to finance Small and Medium Enterprises (SMEs) should target adjustment to how agriculture finance is structured.

Others include: diversifying collateral options, broadening the scope of financing, increasing insurance cover to the agriculture sector and the need to promote greater investment in the sector.

The meeting was organised by the Agricultural Sector Policy and International Reforms Strengthening (Aspires) in collaboration with the Tanzania Private Sector Foundation (TPSF), United States Agency for International Development (USAID) and Michigan State University.

USaid Tanzania acting deputy mission director Anya Glenn said Tanzania should come up with policy reforms that will respond to changing markets, population growth and supply changes.

“For Tanzania to compete with other countries in the region and globally, policies must be evidence-based and adaptable to encourage financial institutions to lend to agriculture producers, businesses and other actors,” recommended Ms Glenn.

Tanzania has made great progress in developing its blueprint for regulatory reforms.

Ms Glenn exuded her optimism that when fully implemented, the reforms would have the capacity to improve Tanzania’s business environment and incentivise financial institutions to lend and invest in agriculture, particularly in the agro-processing industry.

The agribusinesses and other SMEs were facing challenges in both the quantity and quality of financing available.

“To complement debt financing, businesses should be able to access financing that considers unique needs and seasonal aspects of the agriculture sector, including the potential grace periods based on different crops’ growing cycle,” said Ms Glenn.

She said for their part, through a $10 million financing guarantee facility with Amana Bank, they were strengthening Amana’s ability to provide financing to women and youth owned SMEs, including those in agriculture.

“To date, over $1 million worth of loans have been issued to SMEs. We are also supporting the farmer to farmer access to finance programme, which provides financial lending expertise free of charge,” hinted Ms Glenn.

An expert from Aspires, Prof David Nyange, noted that that the value of the economy had shifted on the grounds that the value of intangible assets exceeded by far that of tangible one.

He called for financial institutions to start accepting movable collaterals like market contracts and fixed deposits.

Financial Sector Deepening Trust (FSDT) interim executive director Irene Mlola recommended the diversification in financing by setting a stage for attracting more private equity.

She was of the view that financial institutions should conduct agriculture lending and market assessments and train their staff on agriculture financing best practises.

The director for planning, research and policy at Tanzania Agricultural Development Bank (Tadb), Mr Mzee Kilele, said neither the public nor private sector could alone address the challenges that the agriculture sector is grappling with.

He explained that all stakeholders in the sector should work together to increase public investment in agriculture and partner with and provide support to financial institutions that lend agribusinesses.

“Even within the private sector, as we compete we need to collaborate. But we need good policies to achieve what we want to achieve,” stressed Mr Kilele.

His sentiments were echoed by the TPSF policy, research and advocacy director, Mr Andrew Mahiga.

Tanzania Bankers Association chairman Abdulmajid Nsekela said for the commercial banks to up their loans to the agriculture sector some policies needed to be reviewed to address challenges that the sector is facing.

“Most of the farmers are unable to get financial facility because in most cases banks offer short-term loans which do not suit farmers,” said Ms Nsekela, who doubles as the CRDB Bank chief executive officer.

“For us to have a different way of thinking on how to finance agriculture, it requires collaborative efforts among government, private sector and development partners.”

Tira acting director for planning, research and marketing development Muyengi Zakaria urged for more insurance companies to extend their services to the agriculture sector.

Currently, he said, out of 30 registered insurance companies, only National Insurance Corporation (NIC), Jubilee, UAP, Mgen and Reliance, were engaging in agriculture.

He explained that all stakeholders in the sector should work together to increase public investment in agriculture and partner with and provide support to financial institutions that lend agribusinesses.

“Even within the private sector, as we compete we need to collaborate. But we need good policies to achieve what we want to achieve,” stressed Mr Kilele.

His sentiments were echoed by the TPSF policy, research and advocacy director, Mr Andrew Mahiga.   

Tanzania Bankers Association chairman Abdulmajid  Nsekela said for the commercial banks to up their loans to the agriculture sector some policies needed to be reviewed to address challenges that the sector is facing.

“Most of the farmers are unable to get financial facility because in most cases banks offer short-term loans which do not suit farmers,” said Ms Nsekela, who doubles as the CRDB Bank chief executive officer.

“For us to have a different way of thinking on how to finance agriculture, it requires collaborative efforts among government, private sector and development partners.”

Tira acting director for planning, research and marketing development Muyengi Zakaria urged for more insurance companies to extend their services to the agriculture sector.

Currently, he said, out of 30 registered insurance companies, only National Insurance Corporation (NIC), Jubilee, UAP, Mgen and Reliance, were engaging in agriculture